Coal Prices Decline, Mining Services Difficult to Get New Contracts

The declining trend in coal prices has made mining companies reduce production. This has an impact on the mining service industry which has difficulty obtaining new contracts, such as those experienced by PT Samindo Resources Tbk. (MYOH).

Samindo Resources Head of Investor Relations Ahmad Zaki Natsir said his company had targeted to get a new mining service contract this year. However, until now it has not been realized. "We are still looking for clients, especially for this year," Zaki told on Wednesday (3/27).

The majority of coal produced in the country is low in calories. While the price of low-calorie coal continues to decline to reach US $ 35 per ton, so mining companies slow down the production rate.

In order to realize the target of obtaining a new contract, Samindo has approached one of the companies that have mining areas in East Kalimantan. Without mentioning his name, he said the company produced low-calorie coal.

Through this approach, Samindo hopes to get a new mining service contract with a total production of 1 million tons. At present the company is studying the mining area owned by the company.

Last year Samindo obtained a mining service contract from PT Bayan Resources Tbk. (BYAN) to produce coal with 7 thousand calories, with a total volume of 2.5 million tons. The contract will expire this year.

This year Samindo targets overburden / OB volume of 58 million bank cubic meters (bcm) and coal production of 10.8 million tons. This volume increased from last year's 55 million tons.

Increased production due to a high stripping ratio. Meanwhile, Reference Coal Prices (HBA) in March 2019 for 6,322 calories amounted to US $ 90.57 per ton, or down 1.3% from February at US $ 91.80 per ton. Meanwhile, in January it was US $ 92.41 per ton.

Samindo is a coal mining company whose majority (63.57 percent) is owned by a South Korean company, Samtan Co.Ltd. Other shares of 15.12 percent are owned by Favor Sum Investment Ltd and the remainder is owned by the public.